Listing agreement
Also written Uniform Listing Agreement
The agreement a company signs with a stock exchange fixing its ongoing disclosure duties — board-meeting notices, 15-minute intimation of price-sensitive proceedings, and minimum public shareholding.
In plain language
Getting listed is not a one-time event that ends once the shares start trading. The company signs a listing agreement with the stock exchange, and that agreement is what keeps the obligations running for as long as the shares stay listed.
How it works
Under the listing agreement, the issuer must:
- give the exchange due notice of board meetings where corporate actions — dividends, bonus, buyback, rights issue — will be considered;
- intimate the exchange within 15 minutes of the closure of the meeting about what was decided;
- keep the exchange supplied with the balance sheet, profit and loss account, periodic and special reports, and minutes of general body meetings;
- submit accounts and cash flow statements per the applicable accounting standards, and disclose financial transactions with associates;
- disclose to the exchange any price-sensitive information bearing on the company's operations;
- give effect to transfer of shares where the documents and formalities are in order — and, for minor discrepancies, only after the transferor's approval;
- maintain the minimum public shareholding required under the SCRR; and
- meet corporate governance requirements on board composition and remuneration, an audit committee, oversight of subsidiaries, and full disclosure to the board and audit committee of matters bearing on operations and finances.
The workbook notes the agreement is now a Uniform Listing Agreement, applying the same core framework across equity, non-convertible securities, securitised debt, mutual fund units and Indian Depository Receipts.
A worked example
Vaigai Motors Ltd's board meets on a Tuesday and approves a 1:1 bonus issue. Under the listing agreement, the exchange had already been given prior notice that this item was on the agenda. Once the meeting closes at 3.40 p.m., Vaigai Motors must intimate the exchange of the bonus decision by 3.55 p.m. — the 15-minute window the agreement fixes.
Separately, an investor lodges a physical transfer request for 500 shares, with all documents in order. Under the listing agreement's transfer obligation, Vaigai Motors' RTA must give effect to it; had there been a minor discrepancy — say, a missing witness signature — the transfer could still proceed, but only after getting the transferor's approval on the point.
Why NISM asks about it
Chapter 14, section 14.3 (Listing of Securities), and the LODR overview in section 14.4. Expect the 15-minute post-board-meeting intimation window as the standout number, alongside the list of what the agreement obliges a company to disclose and do.
Common exam traps
- 15 minutes runs from the closure of the board meeting, not from when the decision was taken within the meeting.
- Minor transfer discrepancies still get processed, with transferor approval — the listing agreement does not let a company simply refuse a transfer over a small defect.
- The listing agreement and the SEBI (LODR) Regulations work together — the agreement fixes the company's bilateral obligation to the exchange; LODR is the regulatory framework prescribing much of its content.
Check yourself
1.What minimum public shareholding must a listed company maintain?
- a)25 per cent in all cases
- b)25 per cent of the total issued shares of every class listed, reduced to 10 per cent where post-issue capital at offer price is more than Rs. 4,000 crore but less than Rs. 1 lakh crore
- c)10 per cent in all cases
- d)50 per cent for the first three years
Show the answer
Answer: (b) 25 per cent of the total issued shares of every class listed, reduced to 10 per cent where post-issue capital at offer price is more than Rs. 4,000 crore but less than Rs. 1 lakh crore
Minimum continuous public holding of 25 percent of total number of issued shares of every class of security listed. The public shareholding can be 10 percent for those classes of shares where the post issue capital of the company calculated at offer price is more than Rs.4000 crores but less than Rs. 1 lakh crore.
Under the Securities Contracts (Regulation) (Amendment) Rules, 2021 w.e.f. June 18, 2021.
Three features of the rule are examinable. It is continuous, not a one-time test at listing. It applies of every class of security listed, so each class is measured separately. And the relaxed 10 per cent has both a floor and a ceiling — more than Rs.4000 crores but less than Rs. 1 lakh crore.
A very large company falls outside the relaxation at both ends — below Rs. 4,000 crore and at or above Rs. 1 lakh crore, the 25 per cent rule applies.
Why "continuous" matters. The listing agreement carries the obligation forward: the issuer will undertake to maintain the minimum public shareholding as required by the provisions of the SCRR.
And Chapter 8 records the consequence at the other extreme — where a promoter's acquisition or a buyback would take public holding below the minimum, corrective action follows.
The other listing conditions round out the picture. A minimum average operating profit of Rs. 15 crore, calculated on a restated and consolidated basis, during the preceding 3 years, with operating profit in each of these preceding 3 years, and a memorandum and articles approved by the stock exchange containing what the SCRA requires.
Note the profit test is doubly demanding — an average of Rs. 15 crore and an operating profit in every one of the three years.
2.The protection of investors' interests is a secondary objective of SEBI. True or false?
- a)False
- b)True
Show the answer
Answer: (a) False
The preamble of SEBI provides for "The establishment of a Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market."
Protection comes first in the preamble — before development and before regulation.
And the objective repeats it: the objective of SEBI is therefore to facilitate the growth and development of the capital markets in terms of mechanisms, participants and securities and to ensure the protection of the investors in the securities market.
As does the description of its role: SEBI is the apex regulator of the securities market and also responsible for its orderly growth and protection of the investor's interests.
The whole design of securities regulation is stated the same way: the purpose of securities regulation should be to have markets that are fair, transparent and efficient and ensure protection of the investors' interests.
Everything in the chapter follows from that. Section 6.2 is headed SEBI Regulations specifically aimed at Investor Protection. The ICDR Regulations impose minimum disclosure requirements on the issuer to ensure that investors have all the relevant information before making the investment. The listing agreement contains clauses for continuous and timely flow of relevant information to the investors, corporate governance and investor protection.
SEBI has also issued a host of Investor Charters specifying about the roles of the intermediaries, rights and responsibilities of the investors and disclosure of grievance redressals by the intermediaries to facilitate investor awareness.
And the obligations it imposes on R&T agents are protective in substance — grievances redressed within twenty-one calendar days, demat requests not rejected on flimsy grounds, and the requirement to do all activities in such a way that investors' interests are protected.
3.A company has to follow the regulations laid down by ________ for the issue of capital.
- a)SEBI
- b)State Governments
- c)Stock exchanges
- d)The Reserve Bank of India
Show the answer
Answer: (a) SEBI
The issue of capital by a company is governed by the regulations of SEBI and the Companies Act.
And again for public offers: when a company offers shares to the public, they have to comply with the regulatory requirements laid down by SEBI and the Companies Act.
The specific instrument is named in Chapter 6 — SEBI has laid out the eligibility, norms and rules to be followed for the public issue of securities in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
Option C has a role but not this one. The listing agreement that the company enters into with the stock exchange where the shares are to be listed, also provides for periodic disclosures — the exchange governs the continuing relationship, not the eligibility and process of the issue itself.
Option D belongs to a different market. The RBI is the manager of public debt, responsible for the primary issue of government securities.
The compliance burden is graduated. The extent of regulatory compliances to be followed will depend upon the type of issue and the type of investors from whom capital is being raised, and if capital is being raised from large institutions that have the capacity to evaluate the issue or from promoters or existing investors who already have all relevant information about the company, the procedures and regulatory requirements are simpler, as compared to the company raising issue from the public.
What the rules aim at: the regulations of SEBI and the Companies Act aim at protecting the interest of the retail investors by prescribing disclosure, allotment of shares in dematerialised form, listing the shares on a stock exchange so that investors have liquidity, and the continued participation of the promoters... through a lock-in.
Buy-backs too: the SEBI (Buy-back of Securities) Regulations, 2018 apply to listed companies.
Where this is taught
Free preparation for NISM Series II-ARelated terms
- Change of addressThe investor service request to update the address on a folio — signed by the first named holder, backed by PAN and a fresh address proof, and confirmed to both the old and the new address.
- High Value Debt Listed EntitiesA listed entity with over Rs 5,000 crore of outstanding listed non-convertible debt, made subject to equity-style governance norms — raised from an earlier Rs 1,000 crore threshold.
- Material subsidiaryUnder SEBI's LODR Regulations, a subsidiary whose income or net worth exceeds 10 percent of the listed group's consolidated income or net worth in the immediately preceding accounting year.
- Closely held companyA company whose equity is held only by promoters and a handful of other investors, with no shares offered to the public — it stays free of the disclosure duties a listed company carries.
- T+3 listingThe requirement that shares from an IPO or FPO be listed and start trading within 3 working days of the issue closing (T+3) — reduced from an earlier T+6 by a SEBI circular of August 2023.